Call Volume Explodes After Take-Two Interactive Software, Inc. (TTWO) Taps Record High

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is rallying on rumors of a Red Dead Redemption sequel and call volume is exploding

by Josh Selway

Published on Aug 29, 2016 at 11:54 AM
Updated on Jun 24, 2020 at 10:16 AM

Video game stock Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is rallying today, gaining 4.5% at $44.12 -- possibly in response to rumors that a sequel to its popular "Red Dead Redemption" game could be unveiled next month -- with volume surging both in and out of the options pits. By the numbers, TTWO stock volume is running in the 99th percentile of its annual range, while options volume is currently on pace to hit a 12-month high, with most of the action taking place on the call side of the aisle.

Looking more closely, more than 10,000 TTWO calls have already traded, compared to just 376 puts. As such, call volume is running at an incredible 58 times the intraday norm. A large portion of this activity has occurred at the September 45 call, where it appears traders are opening new positions. Further down the list, traders are also targeting the September 42, 43, and 44 calls. 

While today's volume is certainly unusual, the preference for calls over puts is not. In fact, TTWO's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.42. Not only does this mean call open interest more than doubles put open interest among options expiring within three months, but it also ranks in the low 8th percentile of its annual range. Said simply, short-term options traders have rarely been as call-skewed as they are now. 

Luckily for anyone buying TTWO's near-term options today, premium appears muted, according to our Schaeffer's Volatility Index (SVI) of 24%, which ranks lower than 99% of all readings taken in the past year. In other words, the options market is pricing in historically low volatility expectations right now for TTWO. 

Something else to consider is TTWO's elevated short-interest levels. Over 16% of the stock's total float is sold short, representing nearly eight days' worth of buying power, at the equity's normal daily trading volumes. With this being the case, it's always possible some short sellers are using call options to hedge their bearish positions against an upside surprise. 

Considering Take-Two Interactive Software, Inc.'s (NASDAQ:TTWO) technical performance over the past year, short sellers better hope they're hedged. The shares have added 51.5% in the past 12 months, and hit an all-time high of $44.50 earlier today. Plus, TTWO appears to have a solid level of support sitting just underfoot at the round $40 level. 

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